Posted on 19th September, 2018
Is it payback time?
Help to Buy, the Government’s new-build property assisted ownership scheme, is now five years old and it has helped more than 150,000 people buy their own homes.
As the Credit Crunch began to ease, high street banks and lending institutions still demanded large deposits of 25% The scheme was devised to help people with reasonable incomes who were struggling to save a big deposit to get onto the property ladder. Under it, the Government lends first-time buyers and home movers up to 20 per cent of the price (40% inside London) to buy a new-build property of up to £600,000.
The money is interest-free for five years. In exchange, the Government takes a share of your property and in any price uplift. However, now that the first five year period is up, the early pioneers of the scheme are now being asked to either pay interest or pay the loan back. For the first five years the Government only charges a monthly management fee of £1 on the loan. But in year six this all changes when loan fees apply, starting at 1.75 per cent of the loan.
That’s £1,750 on a £100,000 loan, which needs to be paid on top of your mortgage, service charge and bills. The fees rise by RPI inflation plus one per cent each year. With inflation at four per cent, your fees would rise by five per cent a year.
In reality, the Government’s loan isn’t really a loan but an investment in your property. This means its value rises with house prices. So if the price of your home has gone up 50 per cent in the past five years, so too has the amount you owe the Government.
To avoid paying these rising fees you need to buy back the Government’s share of your home. This will likely mean increasing your mortgage. House-price growth means you may now have enough equity to pass the deposit criteria for a re-mortgage. To do so you may also need a larger salary. A mortgage advisor will be able to advise you upon your options.
If you cannot afford to buy out the whole of your ‘Help to Buy’ loan, you have the option of redeeming it in stages.
To redeem a ‘Help to Buy’ loan if you are selling or purchasing a further share in your property, the scheme requires a valuation prepared by an RICS Surveyor. We at Julian Wilkins Chartered Surveyors specialises in undertaking these valuations within West Sussex. We have recently completed ‘Help to buy’ valuations for homeowners in numerous locations including Shoreham by Sea, Worthing, Wick, Littlehampton, Felpham, Bognor Regis and Chichester. We also cover the Horsham, Southwater and Broadbridge Heath new developments.
Please contact us if we can assist you or you have any questions concerning a Help to Buy valuation. We are always happy to discuss individual cases on an obligation free basis.